LEGALLY SPEAKING, IT DEPENDS: Where’s My Money? Part 2

Christopher Schiller is a NY transactional entertainment attorney who counts many independent filmmakers and writers among his diverse client base. Follow Chris on Twitter @chrisschiller.

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Continuing from Part 1, once we've determined how to calculate a proper payment for our work there comes the task of determining the details of how to get that payment out of the ones who owe us properly and what to do when they give us resistance.

It would be nice if when you showed up at the production company door with a fresh printed script under your arm you could hand it over with one hand and accept the check for payment with the other kind of like an underworld drug deal. Unfortunately it doesn't work that way. Most of the time you deliver the goods and have to wait. And wait. And sometimes, wait some more. How long you have to wait and why vary with the details of your particular position and terms of the agreement.

Here too, the WGA MBA states just how long the signatory company can delay before paying a writer for turning in what is due. Of course, in the heat of things (like starting on the second draft nearly immediately after turning in the first) those deadlines might slip and the writer is faced with stopping the next stage work (which the Guild would technically require you to do) or not making a stink and allowing a little time for accounting to catch up to what's owed you. If you make a fuss what's the guarantee that you'll be given the next stage of writing to do? Or the next project with this producer?

Technically the signatory producer is obligated to live up to the schedule rules and could face penalties, up to denial of signatory status if they fail to comply. But in the real world, as long as things get eventually paid and the delay doesn't cause undue duress it all washes out in the end, right? But how much leeway is to be tolerated and when is it time to get them to abide by their promises?

Whether you are a stickler for sticking to the dates as agreed or allowing a bit of leeway, you need to know where you stand when you demand your rightful payments. The first part of this is understanding the triggering elements of what constitutes delivery in the first place for your agreement. Your agreement should be abundantly clear as to what is expected as a complete delivery for each stage. If you are charged with writing a first draft and on the due date give them only 40 pages of dialog, does that count? What constitutes the matter to be delivered should be stipulated in detail and if not detailed, the person or persons who decide what is going to be acceptable should be set out along with any dispute resolution for that decision. You'll often see terms such as “to the satisfaction of the Producer” in agreements. With most producers that loose language allows the producer to decide they have enough to move to the next stage of production (it'd better be a GREAT 40 pages). With some producers, that clause can be abused leading to draft after draft being done to satisfy a first draft qualification and only paying for the last one. These practices are frowned upon (and restricted by Guild agreements) but they do happen and are traps that unknowledgeable writers can find themselves stuck in.

Also, what constitutes a complete delivery depend on the definition of deliverables, or the list of everything due in hand before delivery triggers can be tolled. In a writer's case that may only be a digital file sent to the right address or a single three-hole punched print out handed over to the right office but it could also include a treatment (for payment) and other documents created along the way not usually considered a “script” but important to the production. For the independent filmmaker the list of deliverables can be considerable and costly to fulfill so it is a good idea to make certain you know everything that goes into being complete, who is going to be paying for them and what kind of timeline is allowed for completing delivery once begun.

Because entertainment contracts can sometimes be delivered in parts or stages, there are more reasons than usual to make sure everyone is aware of when enough delivery has taken place to trigger payments. Waiting for the entire thing to be delivered before paying might be preferable for the receiver, but, since months can go by from first to last parts of a delivery for a film (from first draft to final polish or end of principal photography to DCPs reaching the theaters) everyone must realize that at times the balance between the two parties might not be equal.

In the legal world there are categories that apply to these imbalance situation that, though they're rarely referred to by these legal names, the concepts of responsibility and duties owed will clarify how to handle these imbalanced situations properly and know when to demand redress if warranted. Whenever a party takes a legal or ethical responsibility for the money or other property of another party there is established a fiduciary responsibility to the original owner. Legally the party in control must act in the financial best interest of the other party as long as they call the shots with regard to the property or money. Think of a stockbroker trading with a client's money on the exchanges. That broker is responsible for taking care of that investment, even to his or her own detriment in order to safeguard and fully serve the duty to the original owner.

Say a filmmaker gives a sales agent the right to negotiate deals to represent the film's rights at at film market. The filmmaker relies on the sales agent's contacts to find the best deal for the movie. That sales agent must act in the filmmaker's best interest even if the best deal for the film means the sales agent might lose face with the agent's best connection by taking a better deal from a competitor. The trust given by the filmmaker is in exchange for that high level of duty of care. While the filmmaker hasn't gotten paid for the film yet, the value of the picture is laid in the hands of the sales agent to care for and get the best deal possible. A failure to live up to that duty of care is grounds for suing the sales agent for breach of duty of care.

Similarly, the law has terms for when a thing of value is placed in the hands of another for a period of time without an exchange of ownership. This temporary property exchange is called a bailment between the bailor (the property owner and deliverer) and the bailee (the receiver and holder of the property.) Think of a pawn shop or bringing your car into a repair shop for service. The possessors of the thing exchanged do not own it. They are charged with only being allowed to do certain things to it or with it and must protect it as its owner would protect it him or herself while in the possessor's possession.

Usually a script is considered a work made for hire and therefore contractually the ownership of the producer who hired the writer to create it. But for that concept to have legal reality the producer must live up to the terms within the contract including the payment agreed to. If the producer defaults on the terms of the contract then the created work could arguably be owned by the writer, since no agreement was properly in place that changed the default state of a work being owned by the creator of it. Until the producer fulfills the terms of the agreement between themselves and the writer, the situation is very much like a bailment (though I don't know many industry folk who actually realize this.)

The reason to keep these legal constructs in mind is to build up the strength of your arguments for the potential scenario where the producer doesn't live up to their part of the bargain and fails to pay according to the terms of the contract.

We want to give people the benefit of the doubt. We want to believe people that apologize for an accounting snafu or the check getting lost in the mail. We want to give people a chance to live up to what they've promised. But sometimes, that's just not going to resolve the issue of not getting what's due you. When our generous and optimistic expectations of others have been exhausted it's time to consider our options.

The mother of all recourses, of course, is a lawsuit. It can be satisfying to be officially adjudicated in the right, but, after all the cost, time and reputational impact you may only be able to realize a Pyrrhic victory. Even when you have all the necessary facts in your favor for a court case win, it might behoove you to consider viable alternatives first.

Taking even legitimate legal actions to get your way will do something to your reputation. For future potential employers, it might make them think twice before hiring you. Law suits interfere with the course of business, a death knell for this time sensitive industry. If they see you as quick to sue you might be too much of a risk of delay to bother with.

If, however, you have tried other legitimate courses of action and given the wrongdoer ample time to make things right before taking that last step toward justice, your reputation will fare much better (especially against the reputation of your intransigent opposition.) But what steps can you take short of going to court?

For some people and instances there may be organizations available to help argue your cause and get you what is due. If you are in the position to be aligned with or a member of a guild or union their collective bargaining structure is set up to fight for the rights of their members and interests. Getting the bigger organization involved in your fight makes the argument about more than just a single paycheck earner.

Then there is always press and public opinion to consider. If a production entity is not abiding by its contracts it is usually doing so in private. Hollywood is a very transparent town and bad business affects many different areas simultaneously. If a legitimate gripe about mistreatment or not abiding by contractual obligations becomes known by other companies and individuals considering doing business with that party, they may think twice before engaging with them.

Even the threat of one of these recourses might be sufficient to get some traction towards an amicable resolution. But a word of friendly advice. Don't threaten legal action if you're not willing to follow through. A called bluff will embolden your opponent leaving you in a weakened bargaining position for what you are still willing to do.

When considering any of these or other actions you always need to be aware and make calculations based on a considered balancing of the impact to your reputation against getting everything you feel you deserve. It is a personal tabulation that only you can evaluate fully. Is taking it on the chin this time going to hurt you more than if you stood your ground and maybe lost a job or two (or the rest of your career) to a reputation of being difficult to work with?

Of course the most obvious goal of recompense is getting full payment of what is due you. If that is achievable then that is the target. But sometimes, that is unattainable. What then can “make it right?”

If a contract cannot be fulfilled as stipulated for reasons outside of the bounds of the agreement and there is an adequate amendment clause to the contract, you could alter what will suffice for your compensation in an amendment that is achievable, and most importantly, favorable to your needs. If the producers were counting on a financial deal when they made their promises to you and that deal fell through (through no fault of their own) then you are still owed what you were promised, but, if you can find something that the producers ARE able to provide that you can consider acceptable in replacement for the original promise, then you can go forward with the project with the new terms. Just remember, you are in the driver seat if they can't meet their obligations. You have little incentive to make it easy on them if you are not comfortable with the accommodations they can make.

If they do not have the money at hand to fulfill their promises to you there are legal status levels you can seek to make sure you get what is due you. A good lawyer could get you listed among the highest class of creditors the company owes, placing you among the first in line to get paid when some money does come in to the company coffers. But make sure you are listed high enough to actually be paid. Creditors get paid in order of priority and if you end up being at the end of the list it is likely they would run out of money before getting to you. (Think “net profit participant” - who are just below the lowest creditors on the list.) This is especially true in the results of a bankruptcy where not all creditors are necessarily guaranteed to be compensated for their losses. The priority lists set the order.

An additional consideration if possible is taking out a lien against the company's assets, which is a claim against the existing real property of a party securing the debts owed to the lien holder if not paid. This would work if the company actually owns enough to cover what you are owed (e.g. cameras, real estate, intellectual property – something like post facto collateral.) But be aware that most companies in the industry are structured to own very little, rentals are big, and separated from their parent companies sufficiently so that there are very few real assets to be secured against. And you'd have to stand in line behind prior lien holders as well.

Finally, there is the area of settlements. A settlement is an agreement to resolve differences between parties that cannot or chose not to meet their contractual obligations as stipulated. Usually, if a party has a case against the other party a settlement can be reached for less than what the court case winner would likely have been able to get, but, without the cost and time it would take to get it. You must be careful with settlements, though. They are nearly always judged to be final on the merits. It will be the only thing you will ever get, if you agree to it. And there can be all sorts of stipulations attached to which you must abide, such as gag orders not to talk about the deal reached. Before agreeing to settle you should be fully cognizant of what you are giving up, what you get and how that will affect moving forward. But you should be able to explore ideas in a settlement meeting without too much worry. If settlement negotiations fall through and you have to go to court, the settlement discussions are not usually admissible as evidence in the court proceedings.

Even after these two articles there are lots of elements we haven't touched on dealing with getting paid for your work. As always, it depends on the details of your specific situation and where you are in your career and where you need to be next. Hopefully, your agreements will be clear and rock solid as to what you are owed and when. Now you know how important that can be.

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